FOMC debated wording at May 4 meeting

WASHINGTON (CBS.MW) -- Some Federal Open Market Committee members had reservations at their May 4 policy meeting about language in the official statement saying the panel would raise interest rates at a "pace that is likely to be measured," a summary of the meeting minutes released Thursday shows.

The group agreed unanimously that previous wording that said the FOMC -- the Federal Reserve's arm responsible for setting policy on U.S. interest rates -- could be "patient" in its approach to raising rates was "no longer warranted," the minutes say. Read the minutes.

Some members objected to adding the "measured" wording, fearing that it would tie their hands if their forecast calling for inflation in the U.S. economy to continue at a mild pace didn't pan out.

Other members argued that "the process of returning policy to a more neutral setting would be more gradual, once under way, than in past episodes when inflation was well above levels consistent with price stability," the minutes say.

In the end, though, all 12 voting members of the FOMC agreed that such language wouldn't restrain the committee if economic conditions justified a faster pace of rate hikes.

Although some members argued that inflationary pressures were no longer benign, there is no mention in the summary of any recommendation that the FOMC should raise interest rates at the May 4 meeting.

The FOMC held rates steady at the May 4 gathering, but it voted to boost the overnight lending rate by a quarter of a percentage point during its two-day meeting that concluded Wednesday. See full story.

The committee also retained the "measured" language at the last meeting while adding a vow to do whatever was needed to maintain price stability.

Most analysts have concluded that a "measured" pace of rate hikes means a quarter-point hike at all or nearly all of the four FOMC meetings remaining this year.

Rex
Nutting

Rex Nutting is a columnist and MarketWatch's international commentary editor, based in Washington. Follow him on Twitter @RexNutting.

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